RATES OF THE Treasury bills (T-bills) to be auctioned off this week will likely decline as investors wait for the central bank’s policy decision on Thursday.

The Bureau of the Treasury (BTr) plans to borrow P20 billion via the T-bills on Monday, broken down into P5 billion each from the 91- and 182-day debt papers and P10 billion via the one-year securities.

On Tuesday, the BTr will offer P15 billion in 35-day T-bills.

Bond traders expect the short-tenored securities to fetch lower rates ahead of the policy-setting meeting of the Monetary Board (MB) of the Bangko Sentral ng Pilipinas (BSP)on Thursday.

“For the T-bills auction, we expect the 91-days to move around 5-10 basis points (bps) lower then on 182-day and one-year, sideways. [The movement of the rates will be affected] possibly on the expectations on the outcomes of the MB meeting. [BSP] Governor [Benjamin E.] Diokno mentioned that he plans to keep rates steady at the present level,” a trader said by telephone on Friday.

The Monetary Board has cut benchmark interest rates by 175 bps so far this year, bringing the rate on the BSP’s overnight reverse repurchase, lending and deposit facilities to record lows of 2.25%, 2.75 and 1.75%, respectively.

Mr. Diokno said last week there is “no compelling reason” to slash benchmark interest rates at the moment despite the disappointing second-quarter gross domestic product (GDP) data since monetary policy works with a lag.

The economy shrank 16.5% last quarter, taking the first-half GDP average to a 9% contraction and plunging it into a technical recession.

Meanwhile, another bond trader said they expect strong reception for the debt papers on offer this week as the market remains awash with cash. This will bring down rates on the T-bills by 5-10 bps, the trader said.

The trader said the three- and six-month T-bills may end up thrice oversubscribed, while the one-year papers may receive tenders twice as much as the amount on offer.

Last week, the Treasury raised P20 billion via the three-month, six-month and one-year T-bills out of tenders worth P60.298 billion.

Broken down, it borrowed P5 billion as planned via the 91-day debt papers at an average rate of 1.113%, lower than the 1.221% logged in the Aug. 3 auction.

It also made a full P5-billion award of the 182-day papers at a lower average rate of 1.386% from 1.454% previously.

For the 364-day securities, the Treasury fully awarded the programmed P10 billion. The one-year instruments fetched an average rate of 1.746%, down from the previous rate of 1.749%.

The second trader sees the average yield of the 35-day papers slipping by five basis points from the 1.157% fetched in the Aug. 4 auction where the BTr made a full P15-billion award.

At the secondary market, rates of the 35- 91-, 182- and 364-day T-bills stood at 1.137%, 1.237%, 1.489% and 1.779%, respectively, based on Bloomberg Valuation Service Reference Rates posted on Philippine Dealing & Exchange Corp.’s website.

The government has set a P170-billion borrowing program for August. It will auction off P110 billion in T-bills weekly and P60 billion in T-bonds fortnightly.

It borrows from local and foreign lenders to plug its budget deficit seen to hit 9.6% of GDP this year. It plans to borrow around P3 trillion this year.  — B.M. Laforga

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